Note 7 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 7 – INCOME TAXES

Deferred taxes are recorded based upon differences between the financial statement and tax bases of assets and liabilities and available carryforwards.  Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows (dollars in thousands):

	December 31,
	2020			2019
Deferred tax assets:
Net operating losses	$	75,303		$	70,202
Fixed asset basis difference		4,555			4,547
Contributions carryover		32			30
Deferred compensation		1,289			1,098
Accrued liabilities and others		303			271
Total deferred tax assets		81,482			76,148
Valuation allowance for deferred tax assets		(81,482	)		(76,148	)
Net deferred tax asset	$	-		$	-

The valuation allowance increased $5,334,000 and $4,148,000 in 2020 and 2019, respectively.  The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from expiring net operating losses, terms of stock compensation plans, fixed assets, and accrued liabilities.  

As of December 31, 2020, the Company had net operating loss (NOL) carryforwards of approximately $325 million for federal income tax purposes and $237 million for California income tax purposes.  Such carryforwards expire in varying amounts through the year 2038. For federal losses arising in tax years ending after December 31, 2017, the NOL carryforwards are allowed indefinitely.  Use of the carryforward amounts is subject to an annual limitation as a result of a previous ownership change. 

As of December 31, 2020, the Company possessed unrecognized tax benefits totaling approximately $1.2 million.  None of these, if recognized, would affect the Company's effective tax rate because the Company has recorded a full valuation allowance against these tax assets. 

The Company's tax years 2017 through 2020 remain subject to examination by the Internal Revenue Service, and tax years 2016 through 2020 remain subject to examination by California tax jurisdictions.  In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

A reconciliation of the income tax benefit to the statutory federal income tax rate is as follows (dollars in thousands):

	Year Ended December 31,
	2020			2019
Expected federal income tax benefit at 21%	$	(7,940	)	$	(6,200	)
Loss with no tax benefit provided		3,617			2,508
State income tax		7			6
Expiring carryforwards		1,547			2,427
Non-deductible expenses and other		2,776			1,265
Income tax expense	$	7		$	6

Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets.  Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.